We use a proprietary data set with detailed executive compensation information to examine the relationship between the incentives of the tax director and GAAP and cash effective tax rates, the book-tax gap, and measures of tax aggressiveness. We find that the incentive compensation of the tax...

Building on recent theory, we find strong and robust evidence that external labor market incentives motivate CEOs to adopt more aggressive tax policies in order to improve firm performance and their own labor market value. In addition, we find that the tax aggressiveness-labor market incentives...

That people respond to incentives is a common belief. This became even stronger during the course of the financial crisis in 2008/09 as incentive schemes of banks are broadly considered as main reason for the crisis. This paper covers the question if and how incentives work evaluated by their...

Morse, Nanda and Seru (2011) interpret the data to suggest that more powerful CEOs ex-post change their incentive contracts more. My paper points out a number of issues with their inference. First and most importantly, MNS do not control for the fact that not just the most powerful but almost...

Responding to the financial crisis of 2008, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) to “provide for financial regulatory reform” and to “protect consumers and investors[.]” Section 951 of the Dodd-Frank Act (“Section 951”)...

Clawbacks are contractual provisions in executive compensation contracts that allow for an ex post recoupment of variable pay if certain triggering conditions are met. As a result of regulatory responses to financial crises and corporate scandals as well as of growing shareholder pressure to...

This study investigates the relation between the use of explicit employment agreements (EA) and CEO compensation. Overall, our findings are broadly consistent with the predictions of Klein, Crawford, and Alchian (1978) that an EA is used to induce CEOs to make firm-specific human capital...

In this article, we analyze whether the manipulation of stock options still continues to this day. Our evidence shows that executives continue to employ a variety of manipulative devices to increase their compensation, including backdating, bullet-dodging, and spring- loading. Overall, we find...

This paper examines why powerful CEOs are paid more in total compensation. Broadly, our results are consistent with the managerial ability view. First, CEO power is endogenously determined reflecting the CEO's ability. Specifically, founder-CEOs are more powerful than professional- and heir-CEOs...

Using a news-based index of aggregate policy uncertainty in the US economy, we document a strong negative relation between policy uncertainty and corporate risk-taking. We show that high levels of policy uncertainty are associated with significantly lower future stock return volatility at the...